INSURANCE COMPANIES DO NOT DRAFT POLICIES TO BE READ BY CUSTOMERS

INSURANCE COMPANIES DO NOT DRAFT POLICIES TO BE READ BY CUSTOMERS

by Tom Stilp JD, MBA/MM, LLM, MSC, DBA, December 12th, 2024

According to Professor Boardman, customers do not read their insurance policies, and insurance companies do not draft policies to be read by customers (Boardman, 2010).

Instead, as we have written in prior In the Loop articles, insurance companies prepare policies to be read by attorneys and the courts.

Therein lies the problem.

Customers do not understand what they are buying. The boilerplate of insurance policies is hopelessly confusing and incomprehensible.

In another article, Professor Boardman found that courts rule in favor of the insurance companies (the insurance companies, after all, write the policies), such that the insurance companies are encouraged to retain murky provisions (Boardman, 2006). The simple fact that a court has interpreted language in a policy allows for predictable results in the future given courts’ adherence to precedent and the doctrine of stare decisis, “standing with what has already been decided.”

Courts follow other courts because even the courts have difficulty understanding what the insurance policies mean. The South Carolina Supreme Court stated about insurance policies that:

“Ambiguity and incomprehensibility seem to be the favorite tools of the insurance trade in drafting policies. Most are a virtually impenetrable thicket of incomprehensible verbosity. It seems that insurers generally are attempting to convince the customer when selling the policy that everything is covered and convince the court when a claim is made that nothing is covered” (S.C. Inc. Co. v Fid & Guar. Ins., 1997).

Acknowledging the frustration in trying to interpret insurance policy jargon, Professor Boardman notes: “What the frustrated court does not realize is that it has fired its last shot, and the insurer knows it. Now that the clause at hand has a judicially settled meaning, the clause has a precise interpretation” (Boardman, 2010, at p. 1080).

Insurance policies are not negotiated. Policies are prepared in legalese, favor the insurance company, and are usually given to the customer after the policy has begun. It is no wonder that customers are often disappointed, disillusioned and disgruntled when claims are denied. Customers are unable to understand a policy until it is too late – when the loss has occurred – and the time for the insurance company to pay has arrived.

We have successfully litigated dozens of commercial insurance cases to judgment for clients that thought the denial of their claim would be an unmitigated loss. Experienced counsel provides an advantage to level the playing field in coverage disputes.